The rollercoaster ride for Collins & Aikman's term loan "B" continued last week on news of interest in the company by Lear Corp. and speculation Wilbur Ross & Co. has been accumulating a position in the bank debt. At press time, the "B" loan had risen to 87.35-88.80, according to Markit, up from 83.15-84.80 last Monday. Investors speculated that the rise has been caused by rumblings that Ross and two hedge funds have slowly been buying. Wilbur Ross, ceo and chairman, confirmed his group owned some of the bank debt, but did not say how much. He declined to comment on whether he has been buying more.
In an email response to questions, Ross said his group is interested in the sector but that no one has yet made a substantive proposal. He added that no one will be able to make such a proposal until a sale process begins, which he anticipates to be more than a month away.
In a filing with the Securities and Exchange Commission, David Wajsgras, Lear's executive v.p. and cfo, submitted a letter to Collins & Aikman saying an attractive alternative would be for each company to contribute some or all of their respective interiors business to a newly formed venture. In the letter, Lear said it had net sales of approximately $17 billion in 2004. Calls to Lear were not returned.
"We fully anticipate interest coming from a number of different parties," a spokesman for Collins & Aikman said. "At this time we will not comment on specifics, but we will evaluate and consider all legitimate offers."
Plastech Engineered Products has also expressed interest, sending a letter to the company about potentially making a $1 billion bid for Collins & Aikman. Following that move, Plastech's $290 million "B" rose a point to 95-96.75, but it caused a number of investors to scratch their head and wonder if the smaller company would be able to buy the bigger and more complex Collins & Aikman (CIN, 8/15). The move prompted Moody's Investors Service to place it on review for possible downgrade. At press time the "B" is quoted as 95.60-97.10, according to Markit. "Plastech, to me, has no ability to buy it," explained one portfolio manager about the offer. Calls to Plastech were not returned.
Collins & Aikman's "B" has slowly been inching up since it dropped to around 80 earlier in the month. It had gotten as high as the 90-92 range from 87-89 just days after the company said it was entering Chapter 11 in May. In late June it dropped to as low as 72 after a private call in which lenders were told EBITDA numbers were moving lower.
The company has a debtor in possession facility that includes a JPMorgan-led $25 million revolver and a $125 million term loan "B," both priced at LIBOR plus 3%. The deal was thought to be set to allocate at the end of last week. "The punch line is if the [DIP] is paid off at par, it is beyond money good. It is completely rock sold," another investor said. The DIP was sold out.
